Recent Trade & Tariff Perspectives

April 27, 2022  |  Ivana Gavroski  Manager, U.S. Customs Compliance

container ship being guided into port 

Customs Bond Sufficiency: Is Your Bond Sufficient?

By now, your company is likely all too aware of the Section 301 China Tariffs and the impact they can have on your business. What you might not be aware of is the impact the tariffs, and other factors, can have on the sufficiency of your customs bond.

An insufficient customs bond can prevent your company from importing into the United States, create significant delays in your supply chain, and result in a negative financial impact to your business. To better understand the impact it can have, we need to start with the basics.

What is a U.S. customs bond?

A customs bond, at first glance, is not complicated—it is required for nearly all imports into the United States. It guarantees to U.S Customs and Border Protection (CBP) that the duties, taxes, and fees an importer owes will be paid, including any penalties or other obligations. Therefore, it is to the benefit of CBP. There are two types of customs bonds:

  1. Single-entry bond: Covers the total merchandise value, duties, taxes, and fees for a single customs entry. This is most often the least cost-effective option as there are accumulated costs and usage limitations.
  2. Continuous bond: Covers the total duties, taxes, and fees for a 12-month period. The bond continues to stay on file each year until terminated. This is the most cost-effective option, and the bond type that we will be reviewing when it pertains to an insufficiency.

The customs bond is typically filed with your forwarder, or customs broker, who then works with a bond surety company. It is the surety company that writes the bond and ultimately guarantees that the bond principal, or importer, will meet its obligations. Any obligations not met would need to be met by the surety.

It is for this reason that the surety bears the risk exposure of any obligations not met, which may include an importer’s inability to pay the duties owed to CBP. The bond, in effect, allows the surety to demand reimbursement from the importer if the obligations under the bond are not met.

How is the customs bond amount determined?

Determining the appropriate bond amount for your company is a crucial step in filing the customs bond. The bond amount is calculated by taking 10% of your total duties, taxes, and fees owed in a 12-month period. The minimum continuous bond amount is $50,000, which would allow you to import up to $500,000 in total duties, taxes, and fees.

Determining the potential duty owed for your products requires knowledge of the Harmonized Tariff Schedule (HTS) classifications for your products. Ensure you have the current duty rates by referencing the U.S. International Trade Commission’s HTS database.

When does an insufficiency occur?

Once the total duties, taxes, and fees exceed  more than the current bond’s capacity, the bond is deemed insufficient. CBP then issues a letter to your company requiring a new bond to be filed at a higher amount. Your current customs bond would need to be terminated for the next one to be put on file.

While this might seem like an easy fix, this is where complications often arise.

Risks and negative ramifications of an insufficiency

One of the biggest risks associated with a customs bond insufficiency is the potential for the bond to be terminated. Once a termination has been filed, CBP requires the bond to be terminated within 15 calendar days, after which time a new customs bond would need to be filed.

However, immediately filing another bond is not always possible because of the numerous factors the bond surety considers, plus any potential requirements they may have before they agree to write a new bond. Some factors and requirements may include:

  • Financial statements may need to be reviewed to assess the financial health of your company
  • Collateral, to cover the surety’s potential risk exposure, may be requested by the surety
  • The number of previous insufficiencies your company has had
  • Whether your merchandise is subject to Antidumping and/or Countervailing duties (AD/CVD)

One major factor that can have significant negative impact during the surety’s review is bond stacking, which occurs when a previous customs bond remains on file, or “open.” The duties owed on every customs entry filed under a bond are estimated until they liquidate with CBP, which typically occurs within 314 days, at which time the duties owed become final.

However, liquidation can take many years depending on the entry type. For this reason, a customs bond can remain open, and a liability, until every entry liquidates. Therefore, every bond your company holds that remains open then “stacks” on top of the other open bonds—creating multiple open liabilities for the surety.

Without a customs bond, your company would not be able to import, unless you started using single-entry bonds—a costly option that is unrealistic for most importers. If collateral were to be required by the surety, consider the impact to your company’s cashflow.

These are only some of the potential negative ramifications that can result from a bond insufficiency. Fortunately, these risks are often easily preventable.

Preventing an insufficiency

Simply put, the best way to avoid a bond insufficiency is to determine the appropriate bond amount for your imports. While this can be difficult in today’s chaotic supply chain industry, there are steps you can take to be proactive and mitigate risk.

Consider the following preventative measures to avoid an insufficiency:

  • Project your import volume—early and often
    A sudden influx of shipments in one month alone can be enough to render your customs bond insufficient. Evaluate both the previous and next 12 months of your total duty spend.
  • Communicate within your organization
    This may involve discussing any potential increase in volume or change in product with your procurement team and other internal stakeholders.
  • Increase the bond amount
    If you believe there is the potential for an insufficiency, it’s better to be safe and increase your bond amount now, rather than risk a bond termination, which can leave your company with little time to act.
  • Factor in the type of products being imported
    Are your products subject to additional duties, such as those from the Section 232 steel/aluminum and Section 301 China Tariffs? Products subject to AD/CVD should especially be evaluated as the duty rates are typically significantly higher.
  • Periodically review your customs bond’s sufficiency with your bond holder
    If you do not know who currently holds your bond, check previous customs paperwork for the bond application or a copy of the bond that was filled out. This may or may not be your current customs broker or forwarder.

If you have already received an insufficiency letter from CBP, and your customs bond has not yet been terminated, talk to your customs broker to determine next steps.

Is your customs bond sufficient?

Whether you have received an insufficiency letter, need to determine your bond’s sufficiency, or simply need a customs bond filed—C.H. Robinson can help. Reviewing your bond sufficiency doesn’t take long and may prevent severe shipments delays along with negative long-term financial impact to your business. Connect with one of our trade policy experts to learn more.



Our information is compiled from a number of sources that to the best of our knowledge are accurate and correct. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information published herein.

Review recent perspectives

Have trade or tariff related questions?